Companies record liabilities at their discounted value in the first year. As time passes, they recognize an interest charge on the screen while increasing the obligation. This process liability on the balance sheet reflects the actual amount paid by the company. Companies use accretion expenses to achieve that. What is …

Other comprehensive income (OCI) is a part of the statement of other comprehensive income. When companies have gains from several accounting periods, they must accumulate it and report it on the balance sheet. This cumulative figure appears as accumulated other comprehensive income, similar to accumulated profits and losses. What is …

Mass production is a concept that has revolutionized industries across the globe. It’s a process that emphasizes efficiency, quantity, and speed. The ability to produce goods on a large scale not only reduces costs but also increases availability. Most industries today rely on mass production to meet the high demand …

Startups incur various costs they must account for following the relevant accounting standards. However, the accounting treatment is not as straightforward. Before discussing that, it is crucial to know what startup costs are. What are Startup Costs? Startup costs (or initial or setup costs) represent the financial outlays associated with …

Navigating the world of real estate can often feel like a confusing maze. One term that frequently surfaces is ‘financing contingency’. This concept plays a crucial role in many property transactions. It’s a safety net, a clause in a home purchase agreement that protects buyers. It offers an alternative option …

Expenses are a part of operations and crucial to generating income. However, companies must understand how and when to recognize them under the relevant accounting principles. That is why expense recognition is a critical part of accounting. What is Expense Recognition? Expense recognition in accounting is a critical principle that …

In every business, certain elements guide the company’s direction and growth. These are known as business drivers. They are crucial in shaping the path of all businesses, no matter their size. Each driver has a significant impact on various aspects of the business, such as its strategies, operations, and financials. …

Companies set a par value for their shares, representing the minimum price. However, they may still sell those shares at a higher rate. This process results in capital in excess of par. What is Capital in Excess of Par? Capital in excess of par, often referred to as additional paid-in …

Gross profit represents the earnings a company generates from its operations. Companies include it in the income statement as a part of the calculation for net profits. However, the figure is incomparable and does not show how the company performs over time. Therefore, investors may rely on the gross profit …

When it comes to economics and understanding the flow of goods and services in an economy, one of the most commonly used models is the circular flow model. This model depicts how money and goods move through an economy between households, firms, and governments. It is a simple yet very …